17 сентября 2015 15:43

Kazakh central bank intervenes in FX market to stabilize tenge


Photo © Turar Kazangapov Photo © Turar Kazangapov

The National Bank of Kazakhstan has made exchange rate interventions to stabilize the tenge, Tengrinews reports citing the press office of the bank.

The National Bank of Kazakhstan has made exchange rate interventions to stabilize the tenge, Tengrinews reports citing the press office of the bank.

Kazakhstan's central bank floated the tenge on August 20. Before that it kept the exchange rate in a fixed band with a ceiling of 188 tenge per 1 dollar. After the band was abandoned the tenge plunged to its record low losing more than 50% of its value in a matter of days.

Initially the national bank announced that the tenge would be in free float and it would not not make any interventions. However, since August 20 volatility of the Kazakh currency was very strong raising a lot of concerns among the country's financial experts and creating uncertainty in the society. On September 16 the exchange rate reached 300 tenge per 1 dollar and the National Bank officially changed its mind.  

A massive intervention totally worth $144 million was made at the Kazakhstan Exchange Market (KASE) on September 16. 

After that the National Bank released a statement reminding that Kazakh tenge currency exchange depended on both domestic and external macroeconomic factors, and that the National Bank would not be intervening in the tenge exchange rate or molding it accounting to some predesigned fashion on a regular basis. However, it reserved the right to intervene in the domestic currency market when stability of the country's financial system was threatened.

"Amid the increased volatility of the currency exchange rate driven by speculations of the market players and with no substantial changes in the fundamental macroeconomic factors in place to substantiate the volatility, the National Bank has decided to made interventions on September 16, 2015 to stabilize the situation at the domestic foreign exchange market. On September 16, 2015 the volume of currency interventions of the National Bank amounted to $144 million," the National Bank said.

On September 17, after the intervention was made the exchange rate returned to 283.98  tenge according to Kazkommertsbank.

The so-called "tenge free fall" triggered a shockwave in various sectors. Local state officials insisted on retaining the former prices for food while the government promised to reimburse the lost money on tenge deposits and raise salaries for public sector employees in the beginning of January. Despite the promises of stable financial situation, petrol prices in Kazakhstan did not hold for very long after the devaluation of tenge. In the beginning of September Kazakhstan officially announced that it stopped regulating the prices for AI 92/93 petrol, the most commonly used brand of fuel, which lead to a price spike of more then 10% in the oil producing country.  

By Gyuzel Kamalova, editing by Tatyana Kuzmina

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